Hatfield v. Halifax Plc

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JUDITH HATFIELD, on Behalf of 

Herself and All Others Similarly No. 07-55790

Situated, D.C. No.

Plaintiff-Appellant,

 CV-05-08790-

v. SGL(PLAx)

HALIFAX PLC and HBOS PLC, OPINION

Defendants-Appellees.



Appeal from the United States District Court

for the Central District of California

Stephen G. Larson, District Judge, Presiding

Argued and Submitted

November 20, 2008—Pasadena, California

Filed May 8, 2009

Before: Susan P. Graber and Richard R. Clifton, Circuit

Judges, and David G. Trager,* District Judge.

Opinion by Judge Trager

*The Honorable David G. Trager, United States District Court Judge for

the Eastern District of New York, sitting by designation.

5399

HATFIELD v. HALIFAX PLC 5403

COUNSEL

Eric Alan Isaacson, Coughlin Stoia Geller Rudman & Rob-

bins LLP, San Diego, California, for the plaintiff-appellant.

Philip L. Graham, Jr., Sullivan & Cromwell LLP, Los Ange-

les, California, for the defendants-appellees.

OPINION

TRAGER, District Judge:

Judith Hatfield (“Hatfield”) appeals the decision of the

United States District Court for the Central District of Califor-

nia (“district court”) granting a motion to dismiss in favor of

Halifax PLC and HBOS PLC (the “Halifax Appellees”) on

statute of limitations grounds. Hatfield’s allegations stem

from a June 2, 1997, transaction in which Halifax Building

Society (“HBS”), of which Hatfield was a member, was con-

verted into a publicly traded company called Halifax PLC

(“Halifax”). Hatfield claims that she, and similarly situated

individuals, were deceived into believing that, upon comple-

tion of the transaction, they would be entitled to free shares

in Halifax, which they never received. The district court

found that Hatfield’s claims, brought eight-and-a-half years

after her causes of action arose, were barred by California’s

statutes of limitations, which are four years or less for each of

Hatfield’s claims. On appeal, Hatfield argues that: (1) this

action is governed by the English six-year statute of limita-

tions as provided by the choice of law provision in the Trans-

fer Agreement between HBS and Halifax; and (2) the six-year

limitations period was tolled by the filing of a previous class

action in New Jersey state court, making this action timely.

For the reasons stated below, we vacate the district court’s

decision concerning the untimeliness of Hatfield’s action, but

only with respect to Hatfield individually and members of the

putative class who are California residents.

5404 HATFIELD v. HALIFAX PLC

BACKGROUND

Hatfield was a member of HBS, a United Kingdom-based

building society. In January 1997, HBS sent a voting packet

and a “Transfer Document” to its nine million existing mem-

bers, including Hatfield, informing them that the building

society was converting into a publicly traded company called

Halifax. The Transfer Document provided that, if the conver-

sion was approved, each “qualifying member” would receive

free shares in Halifax. The Transfer Document also outlined

the conditions for member qualification, including the

requirement that a member needed to have a registered address1

in the United Kingdom or a “permitted territory.” The United

States was not considered a “permitted territory.”2 Approxi-

mately 8,000 members, including Hatfield, who resided in

Santa Barbara, California, had registered addresses in the

United States, which disqualified them from receiving the free

Halifax shares. On February 24, 1997, a majority of HBS

members, including Hatfield, voted in favor of the conver-

sion. The conversion then took place on June 2, 1997, at

which point the qualified members’ rights to the free shares

vested. The disqualified members received no shares.

On June 2, 2003, Hatfield, along with three other former

HBS members who failed to qualify for the free shares, filed

1

“Registered Address” was defined in the Transfer Agreement as “the

address to which the Member . . . has requested that communications from

the Society be sent or (if he has not made such a request) the Member’s

. . . address in the Register of Members.”

2

The Transfer Document specifically stated:

A person will only be entitled to receive, or be allocated, free

shares if, as at midnight on the day before vesting day, he or she

has a registered address in the UK or one of the permitted territo-

ries. These are the territories where Halifax has identified a mate-

rial number of customers and where the distribution of free shares

would not result in a breach of local laws or require compliance

with regulatory requirements which Halifax considers to be oner-

ous.

HATFIELD v. HALIFAX PLC 5405

a putative class action in New Jersey Superior Court (“New

Jersey state court action”) naming both Halifax and HBOS

PLC, which in 2001 became the sole owner of Halifax, as

defendants. The complaint primarily alleged that the plaintiffs

were wrongfully deprived of their right to share in the pro-

ceeds of the sale of HBS.

On September 17, 2004, the New Jersey state court dis-

missed the entire action. On December 16, 2005, the New Jer-

sey Appellate Division upheld the dismissal as to Hatfield,

who resided outside of New Jersey at the time of the conver-

sion, because the court did not have general jurisdiction over

the Halifax Appellees, but it reversed the dismissal as to

claims brought against Halifax3 by the only named plaintiff

who was a New Jersey resident at the time of the transaction.

Hyams v. Halifax PLC, No. A-1078-04T3, 2005 WL

3441230, at *9 (N.J. Super. Ct. App. Div. Dec. 16, 2005).

On December 16, 2005, the same day on which the New

Jersey Appellate Division issued its decision affirming Hat-

field’s dismissal from the New Jersey state court action, Hat-

field filed substantially the same putative class action against

the Halifax Appellees in the United States District Court for

the Central District of California (“the district court action”).

Hatfield purported to represent herself and all other similarly

situated plaintiffs who were wrongfully deprived of their right

to share in the proceeds of the sale of HBS. The putative class

was not limited to California residents.

On October 31, 2006, the Halifax Appellees moved to dis-

miss Hatfield’s complaint, claiming that the district court

action was barred by the applicable California statutes of limi-

3

Although finding that the New Jersey courts may exercise specific

jurisdiction over the New Jersey plaintiff’s claims against Halifax, the

New Jersey Appellate Division remanded to the state court for a determi-

nation as to whether New Jersey could exercise specific jurisdiction over

HBOS.

5406 HATFIELD v. HALIFAX PLC

tations. In response, Hatfield argued that, because the choice

of law provision in the Transfer Agreement specified that the

agreement would be “governed by and construed under

English law,” the claims were subject to a six-year statute of

limitations starting from the conversion date. Hatfield further

claimed that the filing of the New Jersey state court action,

which was undertaken within the six-year English limitations

period, tolled the running of the statute of limitations, making

the district court action timely. The Halifax Appellees argued

that the choice of law provision does not apply to Hatfield’s

claims because: (1) she was not a party to the contract; and (2)

there is no indication that the parties to the agreement

intended that the choice of law provision would allow Hat-

field to take advantage of the longer English statute of limita-

tions.

On April 25, 2007, the district court dismissed the action,

holding that Hatfield’s claims were barred by the California

statutes of limitations, which are four years or less for each of

Hatfield’s causes of action. Hatfield v. Halifax PLC, No. CV-

05-8790, slip op. at 5 (C.D. Cal. Apr. 25, 2007). The district

court refused to apply the six-year English statute of limita-

tions, despite the choice of law provision, reasoning that Hat-

field was not a party to the Transfer Agreement and that

“absent an express statement of intent, a standard choice of

law provision . . . will not be interpreted as covering a statute

of limitations.” The district court further held that, even if the

six-year limitations period applied, Hatfield’s action was late

by two-and-a-half years since neither the New Jersey state

court action nor the subsequent appeal tolled the limitations

period.

DISCUSSION

(1)

Choice of Law

[1] At the outset, the Halifax Appellees argue that Hatfield

cannot enforce the choice of law provision because she was

HATFIELD v. HALIFAX PLC 5407

not a party to the Transfer Agreement. Hatfield correctly

replies that there is a provision in the Transfer Agreement that

specifically permits members, such as herself, to enforce the

contract. The Transfer Agreement provides that

each of such Qualifying Investing Members, Quali-

fying Borrowing Members, Investing Members, Bor-

rowing Members, the officers of the society or SCB

members, as the case may be, shall be entitled sever-

ally to enforce his rights in respect of any of those

rights against the Society or the Successor . . . as if

he had been a party to this Agreement.

Emphasis added. Under either English4 or California law, as

an express third- party beneficiary, Hatfield has the right to

enforce a contract made expressly for her benefit, here, the

relevant Transfer Agreement. Cal. Civ. Code § 1559 (“A con-

tract, made expressly for the benefit of a third person, may be

enforced by himat any time before the parties thereto rescind

it.”). “The intent of the contracting parties to benefit expressly

that third party must appear from the terms of the contract.”

Kaiser Eng’rs, Inc. v. Grinnell Fire Prot. Sys. Co., 219 Cal.

Rptr. 626, 629 (Ct. App. 1985). Hatfield was clearly a third-

party beneficiary to the Transfer Agreement such that, under

California law, she can enforce the choice of law provision.

The Halifax Appellees argue that, even if Hatfield is a

third-party beneficiary to the Transfer Agreement, there is no

indication that the parties intended to allow Hatfield to take

advantage of the six-year statute of limitations established

under English law. In determining the enforceability of a

4

Although the issue of whether Hatfield can enforce the contract as a

third-party beneficiary should be decided under English law, neither party

has provided the court with information regarding the relevant English

law. Nonetheless, a cursory examination of English law suggests that “a

person who is not a party to a contract (a ‘third party’) may in his own

right enforce a term of the contract if - - (a) the contract expressly provides

that he may.” Contract (Rights of Third Parties) Act, 1999, ch. 31, § 1.

5408 HATFIELD v. HALIFAX PLC

choice of law provision in a diversity action, a federal court

applies the choice of law rules of the forum state, in this case

California. See Gen. Signal Corp. v. MCI Telecomms. Corp.,

66 F.3d 1500, 1505 (9th Cir. 1995). “If the parties state their

intention in an express choice-of-law clause, California courts

ordinarily will enforce the parties’ stated intention . . . .”

Frontier Oil Corp. v. RLI Ins. Co., 63 Cal. Rptr. 3d 816, 827

n.7 (Ct. App. 2007). Here, the text of the Transfer Agreement,

which provides that the agreement “shall be governed by and

construed under English law,” could not be clearer.

Once it determines the parties’ intention, a California state

court will next analyze whether: (1) the chosen jurisdiction

has a substantial relationship to the parties or their transac-

tion; or (2) any other reasonable basis for the choice of law

provision exists. Hughes Elecs. Corp. v. Citibank Del., 15

Cal. Rptr. 3d 244, 248 (Ct. App. 2004). If either one of these

tests is met, then a California court will enforce the provision

unless the chosen jurisdiction’s law is contrary to California

public policy. Id.; see also Hambrecht & Quist Venture Part-

ners v. Am. Med. Int’l, Inc., 46 Cal. Rptr. 2d 33, 41

(Ct. App. 1995) (“If California has a materially greater inter-

est than the chosen state [in the determination of the issue],

the choice of law shall not be enforced, for the obvious reason

that in such circumstance we will decline to enforce a law

contrary to this state’s fundamental policy.” (internal quota-

tion marks omitted)).

[2] Here, a California court would enforce the Transfer

Agreement’s choice of law provision because England has a

substantial relationship to the parties and permitting the par-

ties to extend the statute of limitations is not contrary to Cali-

fornia public policy. The fact that Halifax is a United

Kingdom company is sufficient to establish a substantial rela-

tionship between England and the parties, such that there is a

reasonable basis for applying the English choice of law provi-

sion. See Hambrecht & Quist, 46 Cal. Rptr. 2d at 41 (finding

that “the parties to a contract have a substantial relationship

HATFIELD v. HALIFAX PLC 5409

with the chosen state if one or more of them is incorporated

there.”). Moreover, under California law, a choice of law pro-

vision also incorporates the governing law’s statute of limita-

tions. “[A] standard choice-of-law provision (i.e., one which

incorporates the ‘law(s)’ of a specified jurisdiction) includes

the chosen state’s statutes of limitations.” Id. at 38; see also

Boracchia v. Biomet, Inc., No. C-07-0650, 2008 WL 512721,

at *3 (N.D. Cal. Feb. 25, 2008) (“Under California law, a con-

tract’s choice of law provision will identify what state’s sub-

stantive law, including the statute of limitations, will be

applied.”).

[3] Furthermore, there is no basis in the record to conclude

that applying the longer English limitations period would vio-

late California public policy. See Hambrecht & Quist, 46 Cal.

Rptr. 2d at 42 (“In general, California courts have permitted

contracting parties to modify the length of the otherwise

applicable California statute of limitations, whether the con-

tract has extended or shortened the limitations period.”).

Although there is a general public policy interest in prevent-

ing the prosecution of stale claims, that policy is not all-

encompassing. Indeed, Section 360.5 of the California Code

of Civil Procedure permits waivers of the California statute of

limitations defense provided that such a waiver is in writing

and does not extend the limitations period for more than four

years at a time. Thus, California appears willing to subordi-

nate its interest in disposing of stale claims to the parties’

desire to have a forum in which to litigate their disputes.

Accordingly, the enforceability of the English choice of law

provision encompasses the English statute of limitations as

well.

The Halifax Appellees argue that the parties to the Transfer

Agreement never intended the choice of law provision to

include the English statute of limitations. In support of their

argument they cite to a federal securities law case, Des Brisay

v. Goldfield Corp., 637 F.2d 680, 682 (9th Cir. 1981), for the

proposition that “[l]imitations periods are usually considered

5410 HATFIELD v. HALIFAX PLC

to be related to judicial administration and thus governed by

the rules of local law, even if the substantive law of another

jurisdiction applies.” As this is a diversity action, California

law, not federal law, controls, and the six-year English statute

of limitations is, therefore, applicable.

Alternatively, the Halifax Appellees also argue that, even

if the English choice of law provision encompasses the

English statute of limitations and can be enforced by Hatfield,

it applies only to Hatfield’s contract claims and not to her

fraud or other tort claims. The California Supreme Court has

held that “a valid choice-of-law clause, which provides that a

specified body of law ‘governs’ the ‘agreement’ between the

parties, encompasses all causes of action arising from or

related to that agreement, regardless of how they are charac-

terized, including tortious breaches of duties emanating from

the agreement or the legal relationships it creates.” Nedlloyd

Lines B.V. v. Superior Court, 834 P.2d 1148, 1155 (Cal.

1992). All of Hatfield’s claims, including her tort claims,

relate to the Halifax Appellees’ alleged failure to fulfill the

promise of free shares. That promise was contained in the

Transfer Document, but not delivered on. All of Hatfield’s

claims are, therefore, governed by the English statute of limi-

tations.

[4] Having determined that the English statute of limita-

tions applies, it is necessary to determine what law governs

tolling. Even if the English statute of limitations applies, Hat-

field’s action is not timely unless the limitations period is

tolled. Normally, when a foreign jurisdiction’s limitations

period is found to apply, that jurisdiction’s tolling laws will

also apply. See Restatement (Second) of Conflict of Laws

§ 142 cmt. f (1971) (“The majority rule is that the forum will

apply the tolling provision of the state referred to by its bor-

rowing statute.”); Uniform Conflict of Laws - Limitations Act

§ 3 (“If the statute of limitations of another state applies to the

assertion of a claim in this State, the other state’s relevant

statutes and other rules of law governing tolling and accrual

HATFIELD v. HALIFAX PLC 5411

apply in computing the limitation period . . . .”). Because we

hold that Hatfield’s claims are governed by the English statute

of limitations, the tolling law to be applied would be that of

English law.

[5] However, although Hatfield has raised and argued the

issue concerning application of the foreign law’s statute of

limitations, neither side has mentioned the issue of England’s

tolling law, despite having the opportunity to do so. See Stuart

v. United States, 813 F.2d 243, 251 (9th Cir. 1987) (“We real-

ize that we may consider foreign law materials at any time,

whether or not submitted by a party . . . [but,] [a]bsent special

circumstances, parties should present issues of foreign law in

their appellate briefs at the latest.” (citations omitted)), rev’d

on other grounds, 489 U.S. 353 (1989). Moreover, neither

party, aside from some passing references in Hatfield’s brief,

discusses the tolling issue or provides the court with any

meaningful information.

[6] As a result of the failure of the parties to provide any

materials, California law provides that by default a court will

look to California tolling law. Under California’s choice of

law rules, a California court “will apply its own rule of deci-

sion unless a party litigant timely invokes the law of a foreign

state.” Hurtado v. Superior Court, 522 P.2d 666, 670 (Cal.

1974). Although this court could undertake an independent

investigation of English law, we are not experts on such law.

Moreover, by citing only California tolling law, the parties

have acquiesced in the application of that law. See Interpool

Ltd. v. Char Yigh Marine (Panama) S.A., 890 F.2d 1453,

1458 (9th Cir. 1989) (“Where no authority, or insufficient

authority, is presented by the parties about foreign law, a

court may conclude that the parties have acquiesced in the

application of the law of the forum.”); DP Aviation v. Smiths

Indus. Aerospace & Def. Sys. Ltd., 268 F.3d 829, 845 (9th

Cir. 2001) (affirming district court’s decision to apply Wash-

ington law despite the agreement’s English choice of law pro-

vision where: (1) the complaint and answer did not mention

5412 HATFIELD v. HALIFAX PLC

the potential application of English law; (2) the pre-trial order

did not refer to English law; (3) both parties argued Washing-

ton law; and (4) neither party urged the application of English

law or cited a conflict with Washington law in pre-trial brief-

ing to the district court).

(2)

Hatfield’s Individual Claims

[7] Under California law, Hatfield’s individual claims were

equitably tolled by the timely filing of her nearly identical

class action in New Jersey state court. Equitable tolling under

California law is a judicially created doctrine that operates to

suspend or extend a statute of limitations in order to ensure

that a limitations period is not used to bar a claim unfairly.

See Addison v. State, 578 P.2d 941, 945 (Cal. 1978) (“[T]he

equitable tolling doctrine fosters the policy of the law of this

state which favors avoiding forfeitures and allowing good

faith litigants their day in court.”). Three factors are taken into

consideration when deciding whether to apply equitable toll-

ing under California law: (1) timely notice to the defendant in

the filing of the first claim; (2) lack of prejudice to the defen-

dant in gathering evidence to defend against the second claim;

and (3) good faith and reasonable conduct by the plaintiff in

filing the second claim. Collier v. City of Pasadena, 191 Cal.

Rptr. 681, 685 (Ct. App. 1983); see also Mayes v. Leipziger,

729 F.2d 605, 608 (9th Cir. 1984) (finding that “California

equitably tolls its statutes of limitation during the pendency of

an earlier case provided there is ‘timely notice, and lack of

prejudice to the defendant, and reasonable and good faith con-

duct on the part of the plaintiff’ ” (quoting Retail Clerks

Union Local 648 v. Hub Pharmacy, Inc., 707 F.2d 1030, 1033

(9th Cir. 1983))).5 “ ‘As with other general equitable princi-

5

Significantly, the “earlier case” referred to in Mayes, which the Ninth

Circuit said might be the subject of equitable tolling, was an action filed

in another jurisdiction. Mayes involved a legal malpractice action brought

HATFIELD v. HALIFAX PLC 5413

ples, application of the equitable tolling doctrine requires a

balancing of the injustice to the plaintiff occasioned by the bar

of his claim against the effect upon the important public inter-

est or policy expressed by the . . . limitations statute.’ ” Lantzy

v. Centex Homes, 73 P.3d 517, 524 (Cal. 2003) (quoting

Addison, 578 P.2d at 945).

[8] The doctrine applies here where: (1) the New Jersey

state court action was filed within the six-year English statute

of limitations, thus providing the Halifax Appellees with

timely notice of Hatfield’s claims; (2) there is no showing that

the Halifax Appellees were prejudiced in gathering evidence

to defend these claims because the two actions were substan-

tially similar; and (3) Hatfield timely filed the district court

action on the same day that the New Jersey Appellate Divi-

sion upheld the dismissal of her New Jersey state court action.

Moreover, California courts have permitted a plaintiff to

take advantage of tolling based on the filing of a prior class

by the plaintiff, a New York resident, in New York federal court. The New

York court dismissed the action for lack of personal jurisdiction, a deci-

sion which was later affirmed by the Second Circuit. The plaintiff then

brought a legal malpractice claim against the same defendant in the Cali-

fornia district court. Mayes, 729 F.2d at 606. The defendant moved to dis-

miss, arguing that the plaintiff’s claim was barred by California’s one-year

statute of limitations for legal malpractice actions. Id. at 607. In opposi-

tion, the plaintiff argued that the New York action equitably tolled the

statute of limitations and requested leave to amend to allege equitable toll-

ing. Id. The district court, however, dismissed the action without leave to

amend. Id. The Ninth Circuit reversed, finding that the district court

abused its discretion in not permitting amendment because the equitable

tolling doctrine could apply where: (1) the New York action was com-

menced within the one-year California limitations period; (2) the New

York action gave the defendant notice of the claims against him so that he

could start gathering evidence and there was no prejudice to the defendant

since the complaints in the two actions were nearly identical; and (3) the

plaintiff demonstrated good faith and reasonable conduct by filing her sec-

ond claim a short time after the New York action was dismissed. Id. at

608.

5414 HATFIELD v. HALIFAX PLC

action. In Becker v. McMillin Construction Co., 277 Cal.

Rptr. 491 (Ct. App. 1991), for example, a plaintiff home-

owner, although not a named plaintiff in the earlier class

action, was permitted to bring a subsequent individual action

despite the fact that the statute of limitations had run.

Although the case was decided under a tolling rule discussed

further infra, the California Court of Appeal held that “the

equities demand that tolling be permitted . . . [because] the

substantive class and individual claims were sufficiently simi-

lar to give [the defendant] notice of the litigation for purposes

of applying the tolling rule.” Id. at 496 (emphasis added).

The Halifax Appellees argue that filing the New Jersey

state court action on the last day of the six-year limitations

period demonstrates Hatfield’s attempt to circumvent Califor-

nia’s statute of limitations. Hatfield’s motivation for filing her

first action on the last day of the limitations period is irrele-

vant to an analysis concerning the application of equitable

tolling, which focuses on a plaintiff’s good faith and reason-

able conduct in filing a second action. Here, Hatfield acted in

a good faith belief that the six-year statute of limitations was

tolled during the pendency of the New Jersey state court

action. Furthermore, Hatfield filed the New Jersey state court

action within the limitations period established by English

law, and she filed the district court action on the day that toll-

ing ceased. Such timely filing, even if done on the last day,

is not evidence of bad faith or forum shopping. Moreover, this

bad faith argument is hardly persuasive considering that if

Hatfield had filed in California first, the Halifax Appellees

would have had to contend with two class actions instead of

just one.

The Halifax Appellees also argue that an action dismissed

for lack of personal jurisdiction cannot be the basis for equita-

ble tolling. They provide no California cases supporting this

proposition, and there is no reason why a California state

court would not apply equitable tolling here. See Valenzuela

v. Kraft, Inc., 801 F.2d 1170, 1175 (9th Cir. 1986) (finding in

HATFIELD v. HALIFAX PLC 5415

a Title VII case that the defendant’s “argument that equitable

tolling is not available because the action [the plaintiff] relies

on to establish tolling was filed in a court without subject

matter jurisdiction is unpersuasive,” reasoning that “[t]he pur-

pose of the statute, the notice to defendant, and the diligence

demonstrated by the plaintiff determine the availability of

tolling, not the presence or absence of subject matter jurisdic-

tion . . . [and] courts [in other jurisdictions] have equitably

tolled statutes of limitations based on actions mistakenly filed

in courts without personal jurisdiction”), amended by 815

F.2d 570 (9th Cir. 1987). Although the usual scenario in

which California has applied equitable tolling involves a situ-

ation where the plaintiff possesses several legal remedies and

reasonably and in good faith pursues one of them to try to pre-

vent further damages, Hu v. Silgan Containers Corp., 83 Cal.

Rptr. 2d 333, 339 (Ct. App. 1999), this in no way implies that

California would not apply equitable tolling here. Further-

more, none of the factors used in deciding whether equitable

tolling applies is affected by the fact that the New Jersey state

court action was filed in a court that lacked personal jurisdic-

tion.

(3)

The Class Action Claims

[9] While there is no California precedent directly on point,

based on closely analogous precedent, we see no reason why

California’s equitable tolling doctrine would not also apply to

the claims of its unnamed putative class members who, like

Hatfield, are California residents. First, the California

Supreme Court has indicated a general agreement with tolling

in the class action context, going so far as to cite with

approval the Supreme Court’s decision in American Pipe &

Construction Co. v. Utah, 414 U.S. 538 (1974). See Jolly v.

Eli Lilly & Co., 751 P.2d 923, 934-35 (Cal. 1988). In Ameri-

can Pipe, the Supreme Court held that “the commencement of

a class action suspends the applicable statute of limitations as

5416 HATFIELD v. HALIFAX PLC

to all asserted members of the class who would have been

parties had the suit been permitted to continue as a class

action.” 414 U.S. at 554. In Jolly, 751 P.2d 934-35, the Cali-

fornia Supreme Court noted with approval the two major poli-

cies that underlie the American Pipe tolling rule, the first of

which is most relevant here. That policy protects the class

action device because, without it, potential class members

would be induced to file protective actions to preserve their

claims, thus depriving class actions of their ability to secure

“efficiency and economy of litigation.”6 Id. at 935 (quoting

American Pipe, 414 U.S. at 553). In Jolly, despite the

endorsement of American Pipe, the court rejected its applica-

tion under the facts of that case.7 Id. at 935-36.

The Halifax Appellees argue that this court’s recent deci-

sion in Clemens v. DaimlerChrysler Corp., 534 F.3d 1017

(9th Cir. 2008), bars Hatfield’s class action. The Clemens

panel, applying California law, refused to allow American

Pipe tolling in a case where a plaintiff sought to use a class

action filed in one jurisdiction to toll an action later filed in

another (a “cross-jurisdictional action”). The plaintiff in

Clemens, relying on American Pipe, argued that the limita-

tions period should have been tolled by the filing of a similar

class action in Illinois, of which the plaintiff was a class mem-

ber. Id. at 1024. The Clemens court reasoned that, although

“[i]n some instances, a plaintiff can rely on the filing of a

prior class action to vindicate the right in question and toll the

statute in the event that the class is not ultimately certified,”

California has not adopted such American Pipe tolling where

6

The second policy underlying American Pipe is to preserve the purpose

behind the statute of limitations by ensuring fairness to the defendant

while preventing claims from plaintiffs who slept on their rights. Jolly,

751 P.2d at 935.

7

Specifically, the court found that the prior class action “neither suffi-

ciently put defendants on notice of the substance and nature of plaintiff’s

claims, nor served to further economy and efficiency of litigation, so as

to justify affording plaintiff shelter under the protective umbrella of Amer-

ican Pipe.” Id. at 936.

HATFIELD v. HALIFAX PLC 5417

the class action was filed in a foreign jurisdiction. Clemens,

534 F.3d at 1025 (concluding that “California’s interest in

managing its own judicial system counsel[s] us not to import

the doctrine of cross-jurisdictional tolling[, under American

Pipe,] into California law.”). Other courts have, under state

law, similarly refused to adopt cross-jurisdictional tolling,

reasoning that “[u]nless all states simultaneously adopt the

rule of cross-jurisdictional class action tolling, any state

which independently does so will invite into its courts a dis-

proportionate share of suits which the federal courts have

refused to certify as class actions after the statute of limita-

tions has run.” See, e.g., Portwood v. Ford Motor Co., 701

N.E.2d 1102, 1104 (Ill. 1998) (finding that the “adoption of

cross-jurisdictional class tolling in Illinois would encourage

plaintiffs from across the country to bring suit here following

dismissal of their class actions in federal court”).

Although the Clemens decision would foreclose application

of American Pipe here, it does not dictate a similar rejection

of California’s equitable tolling doctrine, especially as it

applies to California’s own residents. Although the two types

of tolling—equitable and American Pipe —overlap to some

extent, see Becker, 277 Cal. Rptr. at 496, and even though

California courts have treated them at times as interchange-

able, they are not congruent. The Halifax Appellees them-

selves concede that “the equitable tolling applied to individual

actions is distinct from American Pipe tolling.” They cite

Newport v. Dell, Inc., No. CV-08-0096, 2008 WL 4347311,

at *4 n.8 (D. Az. Aug. 21, 2008), a case decided shortly after

Clemens, which stated that “[t]he class-action tolling dis-

cussed in American Pipe and Crown is a species of legal toll-

ing, not equitable tolling.” Thus, by the Halifax Appellees’

own admission, Clemens, which only rejected the application

of American Pipe tolling in a cross-jurisdictional action, does

not affect the application of California’s equitable tolling doc-

trine, which covers situations beyond those covered by Ameri-

can Pipe. See McDonald v. Antelope Valley Cmty. Coll. Dist.,

194 P.3d 1026, 1032 (Cal. 2008) (“[California’s equitable

5418 HATFIELD v. HALIFAX PLC

tolling] may apply where one action stands to lessen the harm

that is the subject of a potential second action; where adminis-

trative remedies must be exhausted before a second action can

proceed; or where a first action, embarked upon in good faith,

is found to be defective for some reason.”).

[10] California’s equitable tolling doctrine is a policy

adopted and approved specifically by the California courts. Its

purpose is to toll the statute of limitations in favor of a plain-

tiff who acted in good faith where the defendant is not preju-

diced by having to defend against a second action. See Mayes,

729 F.2d at 608. As already noted, California courts have per-

mitted individual plaintiffs to take advantage of the American

Pipe tolling rule where the prior class action provided the

defendant with sufficient notice of the claims made against it.

Thus, in Becker, the plaintiff homeowner was permitted to

bring a subsequent individual action following the expiration

of the statute of limitations. 277 Cal. Rptr. at 496. Certifica-

tion in a prior class action, filed by a fellow homeowner in his

development, was denied because common questions of law

and fact were lacking as a result of the differences in causa-

tion and damages for each homeowner. Id. at 493. The court

held that the prior class action tolled the statute of limitations

for the individual action. Id. at 496. According to the Becker

court, the California Supreme Court’s decision in Jolly “left

open the possibility of applying the [American Pipe] tolling

doctrine even . . . [where] a lack of commonality had been

found, if the circumstances so required.” Id. Becker noted that

the Jolly court’s refusal to apply American Pipe tolling cen-

tered on the fact that, because, in personal-injury mass-tort

class-action claims, each class member’s right to recover

depends on facts particular to his or her case, such claims are

presumptively incapable of apprising defendants of the sub-

stantive claims being brought against them. Id. at 495 (stating

that the court in Jolly “issued a warning: in the application of

the American Pipe rule to personal injury mass tort cases, the

presumption should be that ‘lack of commonality will defeat

certification and preclude application of the American Pipe

HATFIELD v. HALIFAX PLC 5419

tolling doctrine.’ ”). In Becker, on the other hand, “the sub-

stantive class and individual claims were sufficiently similar

to give [the defendant] notice of the litigation for purposes of

applying the [American Pipe] tolling rule.” Id. at 496. Thus,

“tolling is to be allowed only where the class action and the

later individual action or intervention are based on the same

claims and subject matter and similar evidence.” Id. at 495

(citing Jolly, 751 P.2d at 937). Thus, Jolly and Becker would

clearly permit equitable tolling at least as to any class mem-

bers who individually subsequently filed a similar claim.8 In

light of California’s endorsement of class actions generally,

Howard Gunty Profit Sharing Plan v. Superior Court, 105

Cal. Rptr. 2d 896, 901 (Ct. App. 2001), we see no reason

why, in an equitable tolling situation, California would

require each individual California resident who is a member

of the Hatfield class to file individually and burden the courts

with numerous suits. Thus, every indication is that California

would at least apply equitable tolling to claims made by its

own residents.

8

Although American Pipe is clearly applicable to individual actions,

some federal decisions have refused to allow the doctrine to toll the limita-

tions period for subsequently filed class actions. See Robbin v. Fluor

Corp., 835 F.2d 213, 214 (9th Cir. 1987) (“We agree with the Second Cir-

cuit that to extend tolling to class actions ‘tests the outer limits of the

American Pipe doctrine and . . . falls beyond its carefully crafted parame-

ters into the range of abusive options.’ ” (quoting Korwek v. Hunt, 827

F.2d 874, 879 (2d Cir. 1987) (alteration in original))). In Catholic Social

Services, Inc. v. INS, 232 F.3d 1139, 1149 (9th Cir. 2000) (en banc), how-

ever, the Ninth Circuit extended American Pipe to toll the claims of an

entire class where “[p]laintiffs . . . are not attempting to relitigate an earlier

denial of class certification, or to correct a procedural deficiency in an ear-

lier would-be class.” Whether the subject class action was actually trying

to relitigate the certification issue was disputed by one of the dissents. Id.

at 1157-58 (Graber, J., dissenting in part). However, the current action is

clearly not an instance in which Hatfield is trying to reargue a denial of

class certification because of a failure to meet Rule 23 of the Federal

Rules of Civil Procedure or its state counterpart. Rather, the previous class

action was dismissed for lack of in personam jurisdiction. Thus, if Hatfield

had brought the original class action in California, American Pipe would

permit tolling for the entire class action.

5420 HATFIELD v. HALIFAX PLC

[11] Although we conclude that California would allow its

resident class members to reap tolling benefits under its equi-

table tolling doctrine, the same cannot be said for the non-

resident class members. California’s borrowing statute, for

example, prevents non-residents from prosecuting an action in

a California court where such action would be barred under

the statute of limitations of the jurisdiction whose law would

otherwise govern. Cal. Civ. Proc. Code § 361; Cossman v.

DaimlerChrysler Corp., 133 Cal. Rptr. 2d 376, 381 (Ct. App.

2003). At the same time, the borrowing statute also expresses

California’s interest in preserving the claims of its residents.

The borrowing statute provides:

When a cause of action has arisen in another State,

or in a foreign country, and by the laws thereof an

action thereon cannot there be maintained against a

person by reason of the lapse of time, an action

thereon shall not be maintained against him in this

State, except in favor of one who has been a citizen

of this State, and who has held the cause of action

from the time it accrued.

Cal. Civ. Proc. Code § 361 (emphasis added). In other words,

California allows only its citizens to utilize this advantageous

statute of limitations provision. If non-residents are denied the

opportunity to take advantage where California law provides

a longer statute of limitations for its citizens, they certainly

should not be permitted to take advantage of the state’s tolling

doctrine, which lengthens that limitations period. Further-

more, allowing non-resident class members to pursue other-

wise expired claims here would place a significant burden on

California courts. See Shiley Inc. v. Superior Court, 6 Cal.

Rptr. 2d 38, 43 (Ct. App. 1992) (recognizing the “important

public interest[ ] . . . in avoiding congesting California courts

and overburdening California taxpayers”). At the same time,

California’s interest in deterring wrongful conduct will be

vindicated by allowing the claims of California residents to

HATFIELD v. HALIFAX PLC 5421

proceed. Campbell v. Parker-Hannifin Corp., 82 Cal. Rptr. 2d

202, 206 (Ct. App. 1999).

[12] On the other hand, California has a strong interest in

providing a remedy for wrongs committed against its citizens.

In the prior class action, the New Jersey Appellate Division

concluded that it would exercise specific jurisdiction over

Halifax only on behalf of the one named plaintiff who was a

New Jersey resident at the time the alleged wrongful acts

were committed. Hyams v. Halifax PLC, No. A-1078-04T3,

2005 WL 3441230, at *7 (N.J. Super. Ct. App. Div. Dec. 16,

2005). In making its decision, the court took into consider-

ation that “New Jersey has a strong interest in ensuring that

a New Jersey resident claiming breach of contract and fraud

obtains relief if a right to such relief is established.” Id. at *8.

California would appear to have a similar interest with regard

to its residents, particularly here where the previous court

refused to vindicate their claims on account of their non-

resident status. Refusing to apply California’s equitable toll-

ing doctrine would leave all California resident class members

without a remedy, unless they immediately had filed individ-

ual actions upon dismissal of the New Jersey state court

action. Such a result would be particularly unfair here, consid-

ering the likelihood that at least some class members may

have relied on the filing of Hatfield’s original class action to

vindicate their rights. On the other hand, California has no

similar interest in protecting claims by non-residents. More-

over, allowing only the claims of California residents to pro-

ceed would address the concern foreseen by several state

courts that, by permitting cross-jurisdictional tolling, Califor-

nia would become a forum for expired claims brought by non-

resident plaintiffs from around the country where their home

state would not permit the action. See, e.g., Portwood, 701

N.E.2d at 1104; see also Maestas v. Sofamor Danek Group,

Inc., 33 S.W.3d 805, 808 (Tenn. 2000) (“Adoption of [cross-

jurisdictional tolling] would run the risk that Tennessee courts

would become a clearinghouse for cases that are barred in the

5422 HATFIELD v. HALIFAX PLC

jurisdictions in which they otherwise would have been

brought.”).

CONCLUSION

[13] The district court’s judgment dismissing Hatfield’s

class action as untimely with respect to California residents is

reversed, and the case is remanded for further proceedings

consistent with this opinion.

REVERSED and REMANDED.